Question

Cherokee Inc. is a merchandiser that provided the following information: Amount 11,000 15 Number of units sold Selling price per unit Variable selling expense per unit Variable administrative expense per unit Total fixed selling expense Total fixed administrative expense Beginning merchandise inventory Ending merchandise inventory Merchandise purchases $ 19,000 16,000 9,000 25,000 $ 86,000 Required: 1. Prepare a traditional income statement. 2. Prepare a contribution format income statement.

Answer 1

165000 70000 95000 Cherokee, Inc Traditional Income Statement sales Revneue = 11000*15 Cost of Goods Sold Gross Margin selling and Administrative Expenses Selling Expenses Selling Expenses (11000*2)+19000 41000 Administrative Expenses (11000*3)+16000 49000 Total Selling and Administrative Expenses Net operating income 90000 5000 9000) Beginning inventoy Add: Purchases Less: Ending invenotry Cost of Goods sold 86000 25000 70000

165000 Cherokee, Inc Contribution Formate Income Statement sales Revneue Varaible Expenses Cost of Goods Sold 70000 Selling Expenses 22000 Administrative Expenses 33000 Total Variable Expenses Contribution Margin Fixed Expenses Selling Expenses 19000 Administrative Expenses 16000 Total Fixed Cost Net operating Income 125000 40000 35000 5000